Why Every CEO Needs a Swiss Army Knife
In the 2024 Chief Executive Officer (CEO) survey conducted by PwC, product and service innovation emerged as the second most prioritized investment objective among CEOs, following investments in process and system automation.
Also, CEOs do not hesitate to highlight the importance of innovation to them and their companies. According to Frans van Houten Chesky, CEO of Royal Phillips, “Innovation is at the heart of everything we do."
Hence, the question emerges what role does the CEO play in corporate innovation?
Is the CEO the catalyst for fostering a culture of innovation? Does the CEO actively engage as a challenger in innovation initiatives, or does their role primarily involve setting high-level strategic direction, defining risk tolerance, desired outcomes, and timelines for innovation?
Surprisingly, the research shows that CEOs working for larger European companies are not actively involved in innovation – independent of the phase of it.
As we contemplate the trajectory of these findings, drawing from my decade-long experience in corporate innovation, allow me to propose two hypotheses for consideration:
1. Timeframe of Innovation
67% of S&P CEOs serve less than 10 years at a company, while almost 40% stay for only 1-5 years. Taking this timeframe into consideration, it is a tough race to deliver shareholder value through innovation as circles can be lengthy and heavy investments might be needed.
As a result, a strong focus on improving the daily business might be the priority of CEOs. Yet still, the big story about innovation needs to be told to the public on big stages as the company’s value is also influenced by an attractive equity story (and not only harsh numbers).
The low involvement and potentially long innovation cycles are the reason why the time of putting some creative minds in a colorful innovation hub must be over. Instead, the risk appetite of the company must be defined based both on its company- and innovation strategy. Then, an innovation program needs to be put into place so that the CEO has insights into the progress and can report it to the shareholders.
The innovation program can, if activated cleverly, produce regular results: Short-term efficiency gains and improved customer experiences which give enough credibility to the CEO to put some riskier and more long term innovation projects in the mix.
2. Not Applying a Holistic Approach
Corporate Innovation as such can only become relevant to C-Level if it is tackled in a holistic way. It should not be a fleeting idea campaign for a single quarter that sparks temporary innovation, only to revert back to the status quo of regular business operations afterwards. This motivational short phase – others might call it ‘innovation theatre’ – does not hold up in the league of millions where the CEO feels at home.
CEOs must be able to see the effects on innovation – high-level reporting needs to be in place so that top management quickly understands what the innovation portfolio looks like: Does the company have many projects with high insecurity but potentially significant financial impact? Or does the company have lots of innovation projects with high maturity (low risk profile) with a low- to medium financial impact such as smaller process improvements. The CEO is not interested in every single innovation project but should rather guide the big picture, hence the portfolio, and employ the trusted people to run individual projects. The CEO instead needs to challenge the innovation team on questions such as:
... is our innovation portfolio balanced and can we assume returns on investment over the next years from H1 to H3 projects?
...are all projects linked to our innovation- and company strategy?
...are we leveraging the crowd intelligence of our employees to the fullest? If not, how do we unleash it?
...do we need to put additional initiatives into place to reach our targeted innovation performance outcomes? Do we need to get active in areas such as M&A, CVC, intrapreneurship, idea management or startup collaborations?
In order to have these strategic discussions with the CEO, the innovation team needs to have a suitable toolset in place which guides innovation towards the right direction and measures its outcomes.
The Right Tool for the Right Challenge
Have you ever tried to open a wine bottle with a hammer? Or have you ever attempted to hit a nail with a file?
Probably not! Because you’re naturally choosing the suitable tool for the challenge you face. However, in a context of corporate innovation, some companies are not focusing on the right tools and end up with an unsatisfying innovation performance: The CEO is being pushed even further away.
To embrace innovation holistically, one must recognize the diverse array of tools necessary to achieve varying objectives. While the choice of the right tooling does not lie with the CEO, (s)he has three main responsibilities: Firstly, to overlook and strategically guide the innovation portfolio to create sharehold- er value. Secondly, to ensure a culture where ideas, failures and learnings are embraced. Thirdly, to hire the right people who are competent to choose the right tooling and bring it to action.
As a Swiss myself, I love to refer to one innovative invention of my home country: The Swiss Army knife.
A Swiss Army knife is not only handy and flexible to use but also lets the user customize how the knife should be equipped based on the situation:
• The file to improve the status quo
• The knife to craft the future
• The screw driver to unlock the full potential
As a result, the role of the CEO is to build a strong team pushing innovation forward, equipped with a cleverly stacked Swiss Army knife and a solid reporting structure. The CEO will witness firsthand how the company's innovation efforts are shaping the future.
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